Materials Management BUS 3

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Materials ManagementBUS 3 141Mr. Jess
MarinoFall, 2007
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Agenda

• Introduction
• Green Sheet review and other administrative items
• Additional comments on the course
• Initial Lecture

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Introduction
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Marino Background
Academics

• Graduate in Production and Operations Management
• Product of CSU system (San Diego State)
• Developed and presented several courses as a
  Management Consultant

Supply Chain Experience

• Over 25 years as a practitioner at all levels of
  responsibility
• Leadership in small and large organizations
• Many different hourly and professional jobs
• Over eight years as a Management Consultant
• Certified in Production and Operations Management
  by the Association for Operations Management
  (APICS)
• Exposure to many industries and organizations
• Have done business in 13 countries throughout the
  world

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Positions Held
Director of Operations
Director of Supply Chain Management
Director of Materials
Production Control Manager
Executive Director of Fulfillment
Production Supervisor
Buyer
Production Controller
Material Controller
Stockroom Manager
Machine Operator
Mail Room Clerk
Production Expediter
Warehouse Clerk
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Have conducted Business in 13 Countries, Worldwide
SCOTLAND
CANADA
ENGLAND
HOLLAND
FRANCE
UNITED STATES
CHINA
TAIWAN
MEXICO
THAILAND
HONG KONG
SINGAPORE
MALAYSIA
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Green Sheet Review
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Student Information Sheet
NAME MAJOR (and Emphasis) BUS 3 140, 141,
142, 143, 144, 145, 146, 147 CURRENT JOB
(Company Optional) PREVIOUS SUPPLY CHAIN JOBS /
EXPEIRIENCE OTHER
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Course Introduction
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Highest Level Supply Chain Objective
Revenue Utilization of Assets (People, Plant,
Equip)
Cash Inventory
BALANCING keeping Customers completely satisfied
and Resources optimally utilized . against
spending the least amount of Cash and carrying
the least amount of Inventory
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Highest Level Materials Management Process
Identify WHAT Items are Required
Calculate HOW MUCH is Required
Schedule WHEN they are Received FROM WHOM
At the LOWEST Total COST of Ownership
With the Highest QUALITY and Reliability
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How this Course supports Supply Chain Objective
Process
The Right PRICE
The Right SERVICE
paying
The Right SUPPLIER
and
The Right PLACE
with the
The Right TIME
at the
The Right QUANTITY
at the
The Right QUALITY
with the
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Course Overview and Objectives

• Understanding how an organization determines its
  materials requirements, including what needs to
  be purchased, in what quantities, and at what
  delivery schedule
• Understanding the significance of cost management
  and price negotiation, including design, quality,
  and transportation and logistics considerations
• Understanding the critical relationship between
  an organization and its suppliers

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Student Learning Objectives for the Course

• Understand how to calculate requirements
• Understand the purchasing process and how it fits
  within the overall Supply Chain process
• Understand the interaction and leverage between
  the organization and its suppliers
• Develop an interest in pursuing a career in
  Materials Management enhance capabilities of
  thse already in the field

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Additional Notes on the Course

• Buying at work vs. Buying at home
• Pay the least for the most
• Sometimes its Safeway, sometimes Costco,
  sometimes 7-11
• Focus more time and attention on expensive or
  critical items
• 10 of Grade based on Participation
• Issues and observations from students work
  experience
• The positions of Buyer and Material Planner
• Careers in Supply Chain Management

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Purchasing Process Overview
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Objective

• How Supply Management supports overall strategy
• Initial elements the Supply Management Process

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How Supply ManagementSupports Overall Strategy
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Supply Strategy Interpreted in Organizational
Strategy
Supply Objectives
Organizational Objectives
Supply Strategy
Organizational Strategy
Adapted from Leenders, Johnson, Flynn, and
Fearon, Purchasing and Supply Management,
Thirteenth Edition, McGraw Hill Irwin
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Supply Strategy Links Current and Future Markets
to Current and Future Needs
Current Needs
Future Needs
Current Markets
Future Markets
Adapted from Leenders, Johnson, Flynn, and
Fearon, Purchasing and Supply Management,
Thirteenth Edition, McGraw Hill Irwin
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Potential Business-Strategy Contribution Areas

• Social issues and trends
• Government regulations and controls
• Financial planning with suppliers
• Product liability exposure
• Economic trends and environment
• Organizational changes
• Product or service line
• Competitive intelligence
• Technology
• e-Commerce
• Investment
• Mergers/acquisitions/ disinvestment
• Time-based competition

Its not just about COST!
Adapted from Leenders, Johnson, Flynn, and
Fearon, Purchasing and Supply Management,
Thirteenth Edition, McGraw Hill Irwin
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Tactical Elements of theSupply Management
Process
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The 9 Elements of the Supply Management Process
Supply Mgmt
Customer Service
Production
Shipping
Customer Demand
Production Schedule
Process Payment
Maintain Records
Follow-Up Expedite
Receive Verify
Select Supplier(s)
Issue Purchase Order
Establish Specifications
Assess Suppliers
Identify Requirements
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1. Identify Requirements
Identify Requirements
Process Payment
Maintain Records
Issue Purchase Order
Follow-Up Expedite
Receive Verify
Identify Suppliers
Select Supplier(s)
Establish Specifications

• Direct and Indirect
• Material Requisitions
• MRP Output
• Impact of Lead Time
• Other items to consider
• As availability becomes scarce, Purchasing alerts
  users
• Recommending subassemblies instead of components
• Proposing substitute items, where appropriate

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2. Establish Specifications
Establish Specifications
Process Payment
Maintain Records
Identify Requirements
Issue Purchase Order
Follow-Up Expedite
Receive Verify
Identify Suppliers
Select Supplier(s)

• Engineering Drawings and Specifications
• Samples
• Requisition Details (electronic or paper)
• Date originated, Document Number, Dept, Account
  Number, Signature(s)
• Complete description of material or service
  required
• Quantity and date required
• Shipping / delivery instructions
• Authorization to Buy
• Impact of Lead Time
• Other items to consider
• Understanding ultimate purpose (Are they asking
  for a Mercedes or just a car?)
• Catalogues and standard items
• Supplier Input

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3. Identify Suppliers
Identify Suppliers
Process Payment
Maintain Records
Identify Requirements
Establish Specifications
Issue Purchase Order
Follow-Up Expedite
Receive Verify
Select Supplier(s)

• History and Geography
• Request for Quotation
• Request for Proposal
• Request for Bid
• Other items to consider
• Input from Technical Staff
• Other

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4. Select Suppliers
Select Supplier(s)
Identify Suppliers
Process Payment
Maintain Records
Identify Requirements
Establish Specifications
Issue Purchase Order
Follow-Up Expedite
Receive Verify

• Supply Capability
• Quality
• Capacity
• Reliability
• Many other factors to be covered later in
  semester

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5. Issue Purchase Order
Issue Purchase Order
Identify Suppliers
Select Supplier(s)
Maintain Records
Identify Requirements
Establish Specifications
Follow-Up Expedite
Receive Verify
Process Payment

• Relationship to Material Requisition
• The Requisition provides the information that
  populates several Purchase Order data fields (see
  Requisition Details)
• Ensure Risk Management
• Acknowledgement
• Internal Controls
• Budgets
• Approvals
• Recurring Purchase Order Releases
• Pre-negotiated contracts
• Other items to consider
• ALWAYS ensure that the terms and conditions are
  in WRITING. A Purchase Order is a CONTRACT

Continued on next Slide
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5. Issue Purchase Order, continued
Issue Purchase Order
Identify Suppliers
Select Supplier(s)
Maintain Records
Identify Requirements
Establish Specifications
Follow-Up Expedite
Receive Verify
Process Payment

• Discrete Orders
• Pre-negotiated Blanket
• Pre-negotiated Vendor-Managed
• Maintenance, Repair, and Operating Supplies (MRO)
• Bid and Auction
• Corporate Purchase Card (pCard)

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6. Follow-Up and Expedite
Follow-Up Expedite
Identify Suppliers
Select Supplier(s)
Process Payment
Maintain Records
Identify Requirements
Establish Specifications
Issue Purchase Order
Receive Verify

• ERP Applications assume that scheduled dates will
  be received on time
• A Scheduled delivery date needs to be monitored
  and managed
• Possible missed dates must be identified in
  advance and avoided
• If delays are inevitable, recovery plans must be
  developed and managed
• Other items to consider
• An understanding of the Suppliers production
  process, capacity, and constraints is critical to
  collaborative problem solving
• Expediting should be on an exception basis. If it
  is determined that a particular supplier is
  consistently being expedited, corrective action
  should be initiated

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7. Receive and Verify
Receive and Verify
Identify Suppliers
Select Supplier(s)
Process Payment
Maintain Records
Identify Requirements
Establish Specifications
Issue Purchase Order
Follow-Up Expedite

• Relationship to Material Requisition and Purchase
  Order
• Key data elements travel throughout
• Key objectives
• Confirm receipt of goods
• Ensure proper physical condition, quantity,
  documentation
• Quality parameters met
• Cross functional activity among Purchasing,
  Receiving, Materials, and Finance
• Other items to consider
• Receiving is technically a non-value-added
  activity. It is designed to ensure that something
  that should have been done properly actually was.
  The goal is to ensure quality throughout, and
  eliminate the need for inspection

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8. Process Payment
Process Payment
Identify Suppliers
Select Supplier(s)
Receive Verify
Maintain Records
Identify Requirements
Establish Specifications
Issue Purchase Order
Follow-Up Expedite
Key Document Flow
Requisition
Payment
Purchase Order
Packing Slip (Receiving)
Invoice

• Match the data in the Purchase Order, Packing
  Slip, and Invoice
• Discrepancies must be reconciled before payment
  is issued
• Some level of discrepancies can be ignored (e.g.
  if /- 5 or /- 25)
• Audits of all
• Discounts for early payment are often available
  and should be taken whenever possible
• Other items to consider
• Chronic discrepancies from a single Supplier
  could lead to a change

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9. Maintain Records
Maintain Records
Identify Suppliers
Select Supplier(s)
Receive Verify
Process Payments
Identify Requirements
Establish Specifications
Issue Purchase Order
Follow-Up Expedite

• Purchase Orders should be archived for up to 7
  years
• Key Records to be Maintained (from p.77)
• Purchase Order Log of all POs
• Copies of Purchase Orders
• Commodity file
• Supplier history file
• Outstanding Contracts against which POs are
  placed
• Other items to consider
• Can be electronic or paper
• Paper can be managed by a third party